Tuesday 28 February 2017

Car sales mask sharp decline in consumer spending

Ailish O'Hora

Ailish O'Hora

Consumer spending ran out of steam in June, new figures released unexpectedly yesterday show.

The Central Statistics Office (CSO) was forced to issue the retail sales figures after they were mistakenly posted on Twitter.

When car sales boosted by the scrappage scheme are excluded, the value of goods sold in June fell 1.1pc compared with May.

But the amount of goods being bought by consumers also fell month on month by 0.5pc, with the drop reflecting the trend of people saving their cash and our high levels of unemployment, economists said yesterday.

"While the overall figure was only down slightly, the continued boost in motor sales because of the car scrappage scheme masked a sharper general fall," said Ronnie O'Toole, chief economist at National Irish Bank.

He added that the figures were dragged down by drops in the sale of food and household goods.

"The volume of sales have now fallen almost 2pc since April, undoing most of the gains since the start of the year."

Mr O'Toole says that the figures come despite recent consumer confidence surveys that have been more positive and are at a level consistent with steady, if low, growth in sales.

"While not much weight should be put in one month's figures, it is clear that the road to recovery will be a bumpy", as tax revenues and employment -- both of which are heavily dependent on domestic rather than export demand -- remain weak.

Business group Retail Excellence Ireland (REI) said the drop was no surprise.

"Today's results concur with our own quarter-two figures published this week, also showing a decline," said David Fitzsimons, REI chief executive.

Mr Fitzsimons added that while the rate of decline in 2010 had not been as bad as last year a return to continuous like-for-like growth was some way off.

"Although it might be reasonable to expect a lag between increasing consumer confidence and actual spend, active intervention by the Government -- in a similar vein to the scrappage scheme for the motor industry -- would help deliver a stronger and, more importantly, sustained rebound in sales," he said.

Rebound

Earlier this month, the Irish Business and Employers Confederation (IBEC) said trading conditions remained very difficult for Irish retailers during the second quarter of the year despite a modest recovery.

Fergal O'Brien, a senior economist at IBEC, said: "Following a fairly strong rebound in retail sales in the first quarter of the year, it now looks like the second quarter will disappoint. Core retail sales, excluding cars and bars, grew by just 0.2pc in April and fell back by 0.6pc in May.

"The average fall in turnover from peak to trough right across the retail sector is now in the region of 25pc and this provides a very difficult trading environment for retail businesses."

Yesterday, the CSO apologised for the leak of the figures which it said were "unintentionally communicated".

Irish Independent

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